May 12, 2018

Vendors Are Starting To Capitulate

A report from Toronto City News in Canada. “A Leslieville home that can’t even be entered due to its dangerously derelict condition is on the market for $699,000, and at least one realtor thinks the dilapidated digs could be a steal. The boarded-up eyesore at 28 Woodfield Rd. has been vacant for years, but a recent price drop of $100,000 has drawn a sudden surge of interest, with a handful of offers already on the table. The home was last sold in March 2013 for $490,000. In July of the same year it went back on the market for a hefty $1.1 million. Neighbour Greg Lehman has lived next door for the last four years and admits that he even considered putting in an offer when the home recently went back up for sale. ‘You get used to it, but of course it’s an eyesore,’ he said. ‘You don’t have a neighbour. It’s just this dodgy, old house. Well, we do have neighbours — they’re just raccoons and other vermin.’”

The Brampton Guardian in Canada. “According to monthly tracking data from the Toronto Real Estate Board (TREB) for April, the average sale price for all types of dwellings in Brampton fell 7.8 per cent, to $703,210, compared with $763,092 in April 2017. Sales fell by 28 per cent, dropping to 807 last month compared with 1,120 the same month last year. Over the past year, the average sale price for a detached home in Brampton fell 8.7 per cent, to $823,963, while the semi-detached sector saw a 7.1 per cent decline, to $632,762. Brampton’s detached home market peaked at an average sale price of $902,211 in April 2017.”

“The condominium-townhouse segment measured by TREB was down 11.9 per cent, at an average sale price of $448,330 compared with $509,162 last April. Despite the soft market to begin the year, which it blames on market intervention last year by the Ontario and Canadian governments, TREB believes year-over-year prices should begin to increase mildly again, starting in the fall.”

From Bloomberg. “The party’s over for now for those sitting on Vancouver’s most expensive properties. Prices at the top end of the market in the Canadian city plunged 7.6 per cent in the six months to March, making it the world’s second-worst performer during that period, according to Knight Frank. Only Stockholm, the Swedish capital, did worse, falling 9 per cent. At the height of the market, foreign money had flowed mostly into the million-dollar-plus segment of detached homes, according to Adil Dinani, a realtor with Royal LePage.”

“‘Those capital flows have shifted now,’ Mr Dinani said. ‘It’s actually refreshing - you have some time to breathe, to negotiate like a regular transaction.’”

From the Globe and Mail. “Citi credit strategist Matt King was among the first analysts to emphasize that the relationships between asset prices, interest rates, and monetary policy were a global, not national phenomenon. The domestic housing market is an excellent example of how this is so. There is a vocal contingent of Canadian investors who believe the country’s consumer debt and housing bubble is the fault of the Bank of Canada for keeping interest rates too low for too long. To the extent Canada imported low Federal Reserve rates after the financial crisis this is true, but these low borrowing costs were probably not as much to blame as many believe.”

“Mr. King published an extraordinary chart showing that China is responsible for 70 per cent of the entire world’s private sector credit creation. Regrettably, we do not have accurate statistics showing the extent of foreign buying of domestic real estate, but there are enough facts available for us to know that foreign buying is a major factor in real estate.”

“It doesn’t take very many price-insensitive Asian buyers to push Canadian housing values higher. And for this, we can point to ultra-loose monetary policy from half a world away.”

From Xinhua. “A surcharge on foreign purchases of homes in Western Australia will be raised from 4 to 7 percent, in line with the state’s latest budget rollout, authorities said. The surcharge applies to ‘all purchases of residential property by foreign individuals and entities’ from Jan 1, 2019, according to a government statement. The surcharge increase comes amid a housing slump in Western Australia, where recent local media reports have pointed to significant falls in properties prices in and near state capital Perth in the aftermath of a mining boom.”

“The latest rate is a ‘remarkable’ decision by the authorities, the ABC News channel quoted industry group Real Estate Institute of WA President Hayden Groves as saying. ‘By adding another 3 percent to 7 percent, what it effectively will do is just disincentivise further any foreign investment in Western Australian property,’ he said.”

From Domain News in Australia. “Experts fear a ‘housing slump’ will bring pain for the Australian economy, as mortgage lending takes a sizeable hit in March. In the 12 months to March, investor lending has dropped 16.1 per cent. And with intense scrutiny on bank lending standards, following revelations in the royal commission, a crackdown may lead to further weakness in housing finance data. ‘Very weak March housing finance, tighter lending standards yet to fully impact,’ AMP chief economist Shane Oliver tweeted in response to the data.”

From Radio Australia. “The retreat of investors from the property market is starting to look like a rout, with a big fall in applications in March. JP Morgan’s Henry St John said things have started to turn ugly for housing finance. ‘These developments in investor and high loan-to-income lending are likely unfolding on a faster schedule than APRA may have originally intended,’ Mr St John said. ‘To this point, it is likely that the scrutiny the royal commission is placing on the lending practices of the mortgage-broker channel, upon which the major banks have historically relied on for new lending growth, is acting as an additional catalyst.’”

From in Australia. “Sdney’s housing market could turn into a bargain bonanza this winter, with housing experts predicting prices will fall even further than they already have. The median price of a home has already dropped 2.1 per cent this calendar year but new projections from property analysts SQM Research revealed more falls could be on the way. Investors were primarily responsible for driving up prices during the boom from 2013-2016 but have been struggling to get loans since last year, helping ease prices down.”

“Housing experts had earlier thought prices would start going up again once banks began lending to investors once more but this prospect was now unlikely, said SQM director Louis Christopher. ‘It’s now no longer an issue of financing supply but demand for it,’ he said. ‘Investors appear to be looking for other opportunities and are not as interested in the Sydney market any more.’”

“With investors largely absent from sales and the number of Sydney properties available for sale up 34 per cent from last year, buyers are in a strong position to negotiate prices down, Mr Christopher added. ‘Vendors are starting to capitulate,’ he said. ‘Before they were sticking to their guns with prices but they are becoming more negotiable.’”

“Elders Real Estate’s Peter Salisbury said Sydney currently had the best home buying conditions of any point in the past five years. ‘It is a very good time to be a buyer,’ he said. ‘There is more choice and there isn’t as much pressure from other buyers. Last year you could have got about 15 to 20 couples going through an open home. Now you’re lucky if there is five.’”